Unconventional Economist


NAB warns on offshore funding risks

The Australian banks’ heavy reliance on offshore funding has received limited coverage in the press lately. On Thursday, the Australian Financial Review (AFR) ran a story entitled Clyne sounds funding alarm, where NAB’s CEO warned about funding challenges facing Australia’s banks and the risks inherent to the Australian economy. Surprisingly, however, Clyne’s comments were not


Glenn Stevens wags the dog

Today, Fairfax reported the following statements from RBA Governor Glenn Stevens at a question and answer session at the Australian Business in Europe lunch in London (my emphasis): Reserve Bank of Australia chief Glenn Stevens says he is not “terribly troubled” about the level of house prices in Australia. Mr Stevens said the ratio of


Canadian Business on China’s bubble economy

I read an interesting article today from Canadian Business magazine on the challenges facing the Chinese economy and the risks to commodity exporters like Australia and Canada (h/t Financial Insights).  It’s a worthwhile read, particularly for readers seeking a detailed overview of the bear case on China. But a warning – at 5,400 words the


The Economist: Bricks and Slaughter

The Economist has published an excellent article entitled Bricks and Slaughter (h/t Financial Insights for the link). It is part of a series by the Economist exploring the lessons to be learned from the global housing bubble. Below are some key extracts; although I recommend that you read the article in full for yourself. A


Jumping the urban growth boundary

Australia’s state and local governments rely on a variety of regulatory devices to limit suburban growth. One measure that has been implemented in all of Australia’s major cities and some towns (many within the past decade) is the Urban Growth Boundary or UGB.  A UGB is a form of large-scale zoning whereby the government effectively draws a ring around a


Guest Post: FHOG: Proudly Ripping Off Young Aussies since 2000

Sam Birmingham runs a top quality networking site for young professionals called WeBe, which provides up-to-date information on financial matters, work-related issues, lifestyle news and reviews, and current affairs and opinion pieces. WeBe also provides a platform where members can have their voices heard, express opinions and share ideas with other like-minded Young Professionals. With the last week’s Mortgage Choice data indicating


Productivity Commission on Planning/Zoning

Regular readers of this blog will know that I am critical of Australia’s urban planning structure and land-use regulations.  Through growth control policies such as exclusionary zoning and urban growth boundaries, Australia’s governments have effectively told the market where development can and cannot occur. In turn, they have restricted the level of contestability and competition in the land market and helped raise


Puru Saxena on China, Commodities and Australia

Financial Sense Interview with Puru Saxena (click to listen)  A reader, ‘Sceptic’, today posted the above link to an interview on Financial Sense with Puru Saxena. Mr Saxena runs Puru Saxena Wealth Management, an established money management firm based in Hong Kong. Mr Saxena produces the monthly Money Matters report, which follows economic, historical and geo-political trends,


The Economist on Australian Housing

Some readers might have seen it already, but the Economist has just released an article questioning the sustainability of Australia’s house price boom. Here are some key extracts (article available here): This week in The Economist we will publish our quarterly index of house prices around the world. Australia’s homes are the most overvalued in the index. The ratio of prices to


Swan back pedals on banking competition

Let’s take a trip down memory lane. It’s November 2010, the RBA has just raised the cash rate by 0.25%, which is quickly followed by a further 0.2% (0.45% in total) by Australia’s largest lender, the CBA (the other banks follow with smaller rises soon after). The Opposition Treasury Spokesman, Joe Hockey, has already lambasted the Government


America’s inequality

Sachs Says Democrats, GOP Both `Unrealistic’ on Budget Uploaded by Bloomberg. – News videos from around the world. Earlier this month, Columbia University Professor, Jeffrey Sachs, launched a stinging attack on the state of economic and social policy in the United States. Sachs is particularly angry that the Government is cutting core Government services at


Will Canada’s Housing Market be the Next to Fall?

Canada and Australia have a lot in common. Both economies are commodity exporters. Both countries have experienced similar rates of immigration. Both countries largely dodged the global recession that has recently shocked the developed world. And both are said to have world-beating banking systems, with Canada’s ranked as the strongest and Australia’s ranked third strongest in the world by the World Economic Forum’s


CBA housing report gets the balance right

Today a reader emailed me a link to the CBA’s latest housing update. I almost didn’t bother opening the report as I assumed that it would be the same old ‘houses are affordable’ bullish clap-trap that we are used to hearing from the banks. To my surprise, it is actually a balanced, well-reasoned report. Although I don’t


NZ’s Prime Minister on the Australian & Chinese Housing Bubbles

Good work today by Interest.co.nz’s Alex Tarrant, who extracted some nice information from New Zealand’s Prime Minister, John Key, at today’s weekly press conference. According to the article attached to the above video: Prime Minister John Key says he talked about high and rapidly increasing house prices in parts of Australia when he met with the


Housing Debate: Keen vs Joye

  On 9 February 2011, Associate Professor Steve Keen and Rismark CEO Christopher Joye engaged in a debate on housing on Business Today. The debate went largely as expected, with Professor Keen arguing that Australia’s housing bubble had been caused by an explosion of debt levels and lax lending by the banks, as evident by


Gary Shilling on China, Commodities and the AUD

Gary Shilling is the president of A. Gary Shilling & Co., Inc. and author of the best selling book The Age of Deleveraging. Earlier this month, Shilling gave an interview on Tech Ticker, where he outlined why he believes China’s economy is headed for a hard landing and what to do in order to profit from the slowdown. Hard landing within


US Treasury’s Housing Report Gets it Half Right

Earlier this month, the US Treasury released its much anticipated report to Congress on Reforming America’s Housing Finance Market.  At only 31 pages, the report is a refreshingly easy read. It identifies clearly and concisely what went wrong with mortgage financing and lays out three broad options for reform aimed at: Encouraging greater private sector involvement in the mortgage market


The US Government’s Debt Spiral

Following on from my previous post on the impending US municipal bond crisis, I want to provide a brief overview of the debt time bomb facing the US Federal Government. Karl Denninger at Market Ticker has provided a nice analysis of the US Treasury’s 1 February presentation to the Borrowing Advisory Committee (Hat tip Bernard Hickey for the link). Denninger


US Municipal Bonds: The Next Crisis?

Municipal bonds are bonds issued by lower level governments (county, city or state) in the United States to raise capital for public works projects, such as sewerage, water treatment plants and roads. For decades, municipal bonds have been a favourite amongst investors in the higher tax brackets since they pay higher yields than Treasury bonds and are also exempt


The Baby Boomer Bust?

The 21st century will be the century of old age, where declining birth rates meet longer life expectancies. This ageing of the population will affect many areas of the international economy, from consumption and growth to asset valuations.  The impacts from ageing will likely be most acute in Western Nations, although some developing countries, most notably


More on New Zealand’s Deleveraging

Following on from my recent posts on the New Zealand economy (here and here), yesterday’s testimony by Finance Minister  Bill English to Parliament’s Finance and Expenditure Committee confirmed that New Zealand’s economy is facing a prolonged hangover after their borrowing binge in the 2000s. Here’s some of what Mr English had to say (via interest.co.nz): The recovery is going to continue to have


Bizarro World

Today I promised myself that I would take a break from the housing market in order to tackle other areas of interest, such as demographics, China, population policy, and investing. But then I was handed an article by a colleague entitled Why must we make the same old policy failures in the housing market?   At


Disparate groups slam Australia’s housing affordability

In the wake of the 2011 Demographia International Housing Affordability Survey, which identified Australia as having the most unaffordable housing in the Anglosphere, it appears that pressure is building on the Australian Government to take corrective action. Over the past two weeks, concerns have been raised by three disparate groups: the Sacred Heart Mission, the Real Estate Institute of


US Democratic Party Shoots Itself in the Foot

The United States Democratic Party has a problem. Following the 2010 Census, which showed strong population growth in Republican held states, six House of Representative seats and Electoral College votes are to be reapportioned toward states won by John McCain (the 2008 Republican candidate) from states won by President Barrack Obama (see below map). This loss


New Zealand Deleverages (Continued)

Following Wednesday’s post, New Zealand Deleverages: Taste of Things to Come, two important pieces of information have been released supporting my contention that the New Zealand economy is facing a prolonged period of anaemic growth as household’s deleverage following their borrowing binge in the 2000s.  First, data was released on Thursday showing a ‘shock’ rise in unemployment to 6.8% from


Australia doesn’t need more securitisation

Regular readers of this blog will know that I am highly sceptical of measures aimed at increasing competition within the mortgage market. Back in December, I argued that Australia’s housing bubble had been caused by a combination of easy credit and unresponsive housing supply. In the early-1990s, these non-bank lenders entered the Australian mortgage market and began raising funds via securitisation


NZ Deleverages: Taste of Things to Come

Readers that have followed this blog for a while will know that I follow events in New Zealand closely, as I believe that events there can provide important insights and lessons for Australia. In many ways, New Zealand is a microcosm of Australia (minus the resources). We share essentially the same banking system (New Zealand’s largest banks are owned by Australia’s Big


The Australian banks’ $135 billion funding chase

The Australian Financial Review (AFR) today published an article entitled Banks in $135bn funds chase, which highlighted the significant offshore funding challenges facing Australia’s banks. Here’s an extract of what the AFR had to say: The heavy reliance of Australian banks on international financing will force the big four banks to seek about $135 billion in wholesale funding


UK deleveraging: “standard of living to plunge at fastest rate since 1920s”

The Telegraph today published a disturbing article on the dire state of the UK economy: Households face the most dramatic squeeze in living standards since the 1920s, the Governor of the Bank of England warned, as he reacted to the shock disclosure that the economy was shrinking again. Families will see their disposable income eaten up as